Management teams of UK private equity portfolio companies are looking to use the government’s new “employee shareholder” policy to avoid paying capital gains tax on their shares, according to legal experts.

The policy, which came into effect at the start of the month, was the centrepiece in UK Chancellor George Osborne’s conference speech last year, and was intended to encourage employees to take shares in the companies they work for, in return for giving up some employment rights.

Lawyers say the scheme was aimed at small and medium-sized businesses and start-ups, but that there has been increasing interest from private equity firms, with at least two currently attempting to use the new structure as a further way to reduce tax bills. Amanda Onions, of counsel at law firm Hogan Lovells, which is currently trying to use the scheme for the management of a private equity-backed company, said: “It seems like quite a nice gift from the taxman, assuming we can get it to work effectively. If you’ve got a successful exit, then you could be saving a significant amount of tax.”

Under the government scheme, employees are offered shares worth between £2,000 and £50,000 that are exempt from capital gains tax, which is usually 28%.

But on most private equity deals, portfolio company managers are offered shares in the company, dubbed “sweet equity”, which are designed to give management an added incentive to increase profitability when a buyout firm comes to sell a company. Because the value of the shares is dependent on the future performance of the business, the shares can be valued at a low level.

A spokeswoman for HM Treasury said: “We will monitor the use of this new status to ensure it is being used appropriately. There are anti-avoidance rules and safeguards in place to prevent the exploitation of the relief, including where share values are being manipulated artificially. The government keeps all areas of tax policy under review and, if necessary, can introduce further measures which address particular avoidance risks or inappropriate use.”

*Correction: a previous version of this story stated that Amanda Onions was a partner at Hogan Lovells. Her correct job title is of counsel at Hogan Lovells.